Deep Dive: These ‘sin stocks’ are increasing sales the most (and CDC boss’s pick doesn’t make the list)

Brenda Fitzgerald resigned as director of the Centers for Disease Control and Prevention on Wednesday after Politico reported that she had invested in Japan Tobacco, which sells many popular brands of cigarettes, after she took office.

According to the Politico report, Fitzgerald “toured the CDC’s Tobacco Laboratory, which researches how the chemicals in tobacco harm human health” on Aug. 9, only one day after buying shares of Japan Tobacco Inc. JAPAF, -0.86% A spokesperson for the Department of Health and Human Services’s Ethics Office said to Politico that Fitzgerald’s “financial account manager purchased some potentially conflicting stock holdings.”

But even if the decision was made by her financial adviser, she could have set guidelines to avoid purchasing shares in companies that might be in businesses that conflicted with her job.

Of course, Fitzgerald isn’t the only investor looking at “sin stocks,” or those that make tobacco products and alcoholic beverages. But which have been increasing their sales the most and which are favorites among sell-side analysts?

We used data supplied by FactSet to screen companies in the tobacco and alcoholic beverage industries world-wide. This produced a list of 493 stocks. Many companies are traded in multiple markets. We screened further to limit the list to companies rated by at least five analysts, for which sales-per-share data was available, and to exclude non-U.S. listings of a U.S. stock or ADR exists. This brought the group down to 42 stocks.

We looked at sales per share, rather than raw revenue, as the per-share numbers reflect any dilution to the shares cause by the issuance of stock to pay for acquisitions, or for any other purpose.

Here are the 10 remaining companies (11 stocks, as Molson Coors has two common-share classes) that have achieved the largest increases in sales per share over the past 12 months:

Company Ticker Country Increase in sales per share – past 12 months from year-earlier 12-month period Total Return – YTD Total return – 2017 Total return – 3 years
Molson Coors Brewing Co. Class A TAP.A, +1.15% U.S. 196% 3% -12% 11%
Molson Coors Brewing Co. B TAP, +0.66% U.S. 196% 2% -14% 16%
Sichuan Swellfun Co. Class A 600779, +0.53% China 76% -2% 148% 378%
Eastern Co. 629817 Egypt 51% 4% 228% 385%
Kweichow Moutai Co. Class A 600519, +3.06% China 48% 6% 112% 386%
Shanxi Xinghuacun Fen Wine Factory Co. Class A 600809, +0.21% China 28% 15% 132% 213%
Luzhou Lao Jiao Co. Class A 000568, +0.34% China 21% -1% 104% 268%
Wuliangye Yibin Co. Class A 000858, +3.66% China 16% 2% 136% 291%
Nigerian Breweries PLC 663728 Nigeria 15% 11% -6% 17%
Compania Cervecerias Unidas S.A. ADR CCU, +0.55% Chile 13% -1% 43% 66%
Jiangsu Yanghe Brewery Joint-Stock Co. Class A : 002304, +3.97% China 12% 9% 67% 144%
Source: MarketWatch

Eastern Co. was the only tobacco company to make the list of the list of the 10 companies that increased sales the most.

Molson Coors Brewing Co. TAP, +0.66% TAP.A, +1.15%  nearly tripled sales per share after acquiring the 58% of MillerCoors it didn’t already own in October 2016. Jeff Reeves included Molson Coors in his list of five companies that could be acquisition targets in 2018.

Japan Tobacco’s sales over the past 12 reported months were down 3% from the year-earlier 12-month period. The 14 analysts covering the company, whose brands include Winston, Camel and Benson & Hedges, are evenly split between “buy” and neutral ratings.

Here’s a summary of analyst opinion for those that increased sales the most:

Company Share ‘buy’ ratings Share neutral ratings Share ‘sell’ ratings Closing price – Jan. 30 Consensus price target Implied 12-month upside potential
Molson Coors Brewing Co. Class A 44% 45% 11% $86.90 $96.18 11%
Molson Coors Brewing Co. B 47% 42% 11% $83.48 $96.57 16%
Sichuan Swellfun Co. Class A 100% 0% 0% $45.65 $65.87 44%
Eastern Co. 60% 40% 0% $458.78 $547.80 19%
Kweichow Moutai Co. Class A 88% 13% 0% $742.08 $806.77 9%
Shanxi Xinghuacun Fen Wine Factory Co. Class A 91% 9% 0% $65.42 $70.87 8%
Luzhou Laojiao Co. Ltd Class A 83% 17% 0% $65.09 $74.30 14%
Wuliangye Yibin Co. Class A 90% 10% 0% $81.40 $90.51 11%
Nigerian Breweries PLC 0% 40% 60% $150.00 $133.37 -11%
Compania Cervecerias Unidas S.A. ADR 9% 55% 36% $29.21 $27.36 -6%
Jiangsu Yanghe Brewery Joint-Stock Co. Class A 88% 13% 0% $124.99 $139.65 12%
Source: FactSet

Going back to our list of 42 stocks, 19 have majority “buy” ratings from analysts:

Name Ticker Country Industry Share ‘buy’ ratings Closing price – Jan. 30 Consensus price target Implied 12-month upside potential
Sichuan Swellfun Co. Class A 600779, +0.53% China Alcoholic Beverages 100% $45.65 $65.87 44%
Brick Brewing Co. BIBLF, +0.26% Canada Alcoholic Beverages 100% $3.24 $4.64 43%
Shede Spirits Co. Class A 600702, +1.61% China Alcoholic Beverages 100% $42.81 $54.40 27%
Chongqing Brewery Co. Class A 600132, +2.35% China Alcoholic Beverages 100% $22.55 $26.14 16%
Shanxi Xinghuacun Fen Wine Factory Co. Class A 600809, +0.21% China Alcoholic Beverages 91% $65.42 $70.87 8%
Wuliangye Yibin Co. Class A 000858, +3.66% China Alcoholic Beverages 90% $81.40 $90.51 11%
Hite Jinro Co. 000080, -0.86% South Korea Alcoholic Beverages 89% $23,200.00 $30,000.00 29%
Kweichow Moutai Co. Class A 600519, +3.06% China Alcoholic Beverages 87% $742.08 $806.77 9%
Jiangsu Yanghe Brewery Joint-Stock Co. Class A 002304, +3.97% China Alcoholic Beverages 87% $124.99 $139.65 12%
Luzhou Lao Jiao Company Ltd. Class A 000568, +0.34% China Alcoholic Beverages 83% $65.09 $74.30 14%
KT & G Corp. 033780, -0.93% South Korea Tobacco 76% $107,500.00 $130,896.56 22%
Constellation Brands Inc. Class B STZ.B, +0.23% U.S. Alcoholic Beverages 74% $220.60 $243.67 10%
Gudang Garam GGNPF, +2.25% Indonesia Tobacco 70% $6.36 N/A N/A
Thai Beverage Public Co. TBVPF, +0.43% Thailand Alcoholic Beverages 72% $0.69 $1.04 50%
Constellation Brands Inc. Class A STZ, -0.26% U.S. Alcoholic Beverages 71% $220.05 $243.27 11%
Altria Group Inc. MO, +0.80% U.S. Tobacco 69% $69.82 $76.54 10%
Anadolu Efes Biracilik ve Malt Sanayii A.S. ADR AEBZY, +6.57% Turkey Alcoholic Beverages 64% $1.51 $1.43 -6%
Eastern Co. 629817 Egypt Tobacco 60% $458.78 $547.80 19%
Craft Brew Alliance BREW U.S. Alcoholic Beverages 60% $19.80 $22.20 12%
Source: FactSet

Also see: Are ‘sin stocks’ good for one’s portfolio? A new ETF is wagering big on vice

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